City officials argue that an increase in taxi permits would help rather than hurt drivers because a "significant unmet need" in the market is being filled by illegal cabs and town cars.

City Council voted 4-0, with Commissioner Randy Leonard absent, to approve Union Cab, but the decision came with a condition. If a third party buys the cooperative, the new entity would have to go back to the city for permits.

City Council also approved an anti-kickback rule that prohibits doormen and others from soliciting or accepting payment from drivers in exchange for fares. Taxi drivers had pushed the measure, modeled after rules in San Francisco and Santa Monica, Calif., because such payments cut into meager salaries and put passengers at risk, they said.

A driver who has to pay a doorman $10 for a fare may, for example, take a longer route to the airport to recoup the money, they argued.

Violators now face a $1,500 fine for the first offense, a $2,000 fine and 10-day driver suspension for the second offense and a $2,500 and driver permit revocation for the third offense, city documents show.

In addition, City Council raised the city's per mile fare from $2.30 to $2.60 and increased fees on taxi drivers and companies. Those higher fees -- estimated to generate an additional $200,000 per year -- will pay for increased industry regulation including driver training and crackdowns on illegally operating cabs and town cars.